We all applaud President Trump as he eliminates one terrible Obama regulation after another that prevented economic and job growth. His immigration policy, when passed, will mean more money and jobs for Americans and lower taxes will not only stimulate business, but put more money in the hands of workers and allow for job creation. The dreadful Obamacare mandate has been eliminated, thus defanging that terrible program. Still there is one aspect of his legacy that could utterly destroy the American economy and throw financial markets into panic and free fall.
Those of you who follow my blog, know that I am constantly discussing Obama's exposure to sociology professor Richard Cloward while a student at Columbia University. In 1966 Cloward and his wife and fellow sociologist Francis Ford Piven proposed an economic program that became known as the Cloward-Piven Strategy. In short, this strategy was to expand the welfare rolls to the point where the welfare system could not support it and so it would collapse and then it would be replaced by a guaranteed minimal income and in theory eliminate poverty. (what a joke) Heavily taxing working Americans would fund by taxing this insane program. This massive redistribution of wealth would disincentivize people from working, cause social disruption, unrest, possibly violent class and racial warfare, and possibly collapse the economy and destruction of the value of the dollar, all recognized by Cloward and Piven. Obama saw this strategy as merely a starting point and then, as if on steroids, went on a spending spree that cost $10 trillion dollars, doubling the national debt. Placing high taxes and restrictions on banking and business, implementing trade deals that favored our trading partners rather than America, and opening our border to a flood of unskilled and welfare benefit requiring illegal aliens, Obama thought that the debt he created would eventually collapse the economy and it still might. Critics said that Obama was naive, didn't know or understand the economy or what he was doing. Believe me, he knew exactly what he was doing. It was just not conceivable to most that any president would hatch such a nefarious traitorous plot.
Let me explain. The US Government sells treasury products to cover the extra money that it needs to print. These are sold to banks, individuals, foreign countries, especially those with whom we have a large trade deficit like China or held by the Federal Reserve itself. During the Obama regime, interest rates, as set by the Federal Reserve, were low or even at zero due to the economic crisis brought on by the Democrats in 2008. Servicing this massive debt runs about $400 billion per year and that comes out of tax payer dollars, dollars that could be used for other items if at all. Due to rising interest rates it is estimated by the Congressional Budget Office that by 2024 the cost of servicing will be $800 billion. Obama hopes that that would lead to default which would have dire consequences for the economy and throw the entire world into depression. The United States has never defaulted on its debt, though there was something of a delay in making debt payments in 1979 under Carter that technically was a default.
Another factor to consider is the rating of US sovereign debt. Rating is the based on the likely hood that the debt and interest payments will be paid. Up until 2011, US sovereign debt has been rated at AAA, the highest rating possible, but in August, 2011, something almost earth shattering in the financial world happened. Standard and Poor lowered the rating on US sovereign debt a notch to AA+. This sent shock waves through the financial world with markets responding by dropping 8% in a day. Some other rating institutions followed suit and one even eventually lowered the rating to A-, almost as low as that of a relatively healthy third world country, as Obama continued to pile up the debt. The regime attempted to retaliate and filed law suits against the rating firms (typical Obama political maneuver). When the Republicans gained control of Congress in 2014, the ratings went back up to AAA. The Federal Reserve continued to keep interest rates low, at zero and only raising them a tiny amount up to the elections of 2016. How much pressure the Obama political machine and DOJ put on Fed. Chairman Ben Bernake and its regional directors, we may never know. They are supposed to be independent.
What we do know is that Obama left us with $20 trillion in debt and slowly rising interest rates. Though the CBO believes the debt will continue to grow by small amounts, they have not fully taken into account the long term benefits of tax cuts and the elimination of restrictions that Obama placed on business and the growth of the economy. As a businessman, President Trump knows that sometimes you need to spend a little money to make money. What he is counting on, and so far this seems to be the case, is that his tax program will produce increase in GDP and will include more jobs, wage raises, business expansion, and lowering of trade deficits. Income will increase and expenditures decrease meaning that if Congress can gets its act together, the surplus can be used for paying down the debt, saving America and ending the most potentially destructive part of the Obama legacy.
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